Texas Settles with Xerox for $235 Million Out of “Desire to Buy Peace and Avoid Further Litigation”

This morning Attorney General Ken Paxton announced that the State of Texas had settled its $2 billion Medicaid fraud lawsuit against Xerox/Conduent, its former Medicaid administrator from 2004 to 2012, for $235 million. The settlement over Xerox/Conduent's inadequate orthodontic prior authorization process was touted as a record recovery for Medicaid fraud in Texas. The release can be read below.

No admission of wrongdoing or liability

A copy of the settlement agreement linked to by the release (and available below) shows that the state did not get any admission of wrongdoing or even liability by Xerox.

It states that the settlement occurred "as a result of a mutual desire to settle their disputes and to avoid the delay, expense, inconvenience, and uncertainty of protracted litigation..."

In fact, it states Xerox/Conduent "have denied and continue to expressly deny the allegations... and also have a number of defenses to the State of Texas's claims, which they have vigorously asserted."

No penalties

The settlement does not include ANY penalties for the company whatsoever. Xerox/Conduent is simply reimbursing the state $212 million "for monetary losses claimed to have resulted from alleged failures to comply with obligations by Conduent Healthcare or TMHP under the 2003 Contract and 2010 Contract..." plus another $23.5 million for attorney fees.

"In the public interest"

The agreement states also that "the State of Texas (including but not limited to HHSC and the Texas Attorney General's Office) has concluded that the settlement, as set forth in this Agreement, is in the public interest and is fair, adequate, and reasonable under all the circumstances."

Xerox had agreed to indemnify the state for not meeting performance standards

It is an odd settlement considering a document just received by TDMR this week shows that Xerox in June of 2010 guaranteed the state that it would reimburse Texas Medicaid without question $2,500 for each prior authorization that did not meet "performance standards."

Prior Authorization and Referral Management-Prior Authorization Processing (PAC-20)Performance Standard: Receive, correctly disposition (i.e. approve, deny, modify, or determine incomplete), and enter into the PA system, prior authorization requests for all services, except for non-emergency ambulance requests, within three (3) business days of receipt. Any exceptions to this requirement will be determined by the State including but not limited to exceptions related to Alberto N. litigation, described above.Liquidated Damages: Up to $2,500 per occurrence may be assessed for any day in which the performance standards are not met

Xerox penalty would have been $1.25 billion based on indemnification

As the state claimed that Xerox had approved some 500,000 prior authorizations from 2004 to 2012 without proper review, this agreement signed by Xerox would amount to a $1.25 billion penalty to which the company had already agreed.

The state settled for less than 20% of that amount

No qui tam relators

There is also nothing in the agreement about qui tam relators related to the case.

AG took a year to start investigating Xerox

Another interesting point is that the agreement states that the AG's office began their investigation into Xerox/Conduent in June of 2012.

This is more than a year after WFAA had publicized the large amount of orthodontic spending in Texas, compared to other states and even after Dr. Jerry Felkner was shown avoiding WFAA investigative reporter Byron Harris in the Xerox/Conduent parking lot.

It then took the state another two years to bring suit against Xerox/Conduent and fire them as the lead Medicaid contractor in TMHP. At the same time, Texas media and the NY Times were writing stories on why Texas was still involved with Xerox.

Still plans to go after dentists

Yet the state was going after dentists in 2011 and still plans to go after dentists, per Paxton's release, even though all dentists that went to State Office of Administrative Hearings (SOAH) were found not to have committed fraud.

Comments

What a crock of crap. Exchange 15% of the damages, and Xerox walks away. No fault, no charges. Consider it a misunderstanding. But the dentists are on the hook. Nice, though many of them knew what shenanigans were going on! Fraud…the American way!

Makes you wonder if Paxton owns Xerox Stock!
Or has a deal to become a lobbyist for them when he’s finally put out to pasture.
What a terrible deal for the taxpayers. The case was an open and shut, easy one to prove.